3 Key Trends for Nasdaq OMX

By: Trefis

Posted: 5/9/2011 9:16:00 AM

Referenced Stocks: CME;GS;MS;NDAQ;NYX

Nasdaq OMX Group (
NDAQ
) is a leading global exchange group that delivers trading,
exchange technology, securities listing, and public company
services across six continents. It is the largest cash equities
securities market in the U.S. in terms of listed companies and in
the world in terms of share value traded. As of December 31st, the
NASDAQ Stock Market was home to 2,778 listed companies with a
combined market capitalization of approximately $4.6 trillion.
Nasdaq competes with NYSE Euronext (
NYX
),
CME Group
(
CME
), BATS Global and other regional exchanges.

We have a price estimate of
$28.80 on Nasdaq's stock
which is about 5% above the current market price. Below we look at
3 industry trends impacting Nasdaq currently.

1) Rapid Growth in U.S. Listed Options Contracts
Traded

There has been a steady increase in the number of equity options
contracts traded in the U.S. It increased from 13 million in 2008
to 14.3 million in 2010 but the volumes of options contracts traded
in the U.S. remains significantly lower than Europe though we
expected options volumes to grow rapidly in the coming years. We
expect the daily number of U.S. listed option contract to touch 26
million by the end of our forecast period fueled by factors such as
improvements in trading tools, shift towards electronic and
computer based trading and an increase in algorithmic trading.

2) Growth in Nasdaq's Market Share of U.S. Listed Option
Contracts

Nasdaq OMX PHLX and the Nasdaq Options market have a combined
market share of 27% of the U.S. options market in 2010, which
increased from 17% in 2008. Nasdaq OMX PHLX alone comprised 23%
market share of the same. Launch of new exchanges helped Nasdaq to
capture some market share in 2010. We expect Nasdaq to capture 40%
of the market by the end of our forecast period supported by the
launch of new exchanges by Nasdaq which lets customers choose
between price/time or price/size models.

3) Decline in Nasdaq's Market Share of U.S. Cash Equity
Trading

Nasdaq market share has stagnaged from 2006 to 2008 as new stock
markets like BATS Global Markets and Direct Edge have been able to
capture 20% share of the total U.S. cash equities market. Nasdaq's
market share declined from about 30% in 2008 to 20% in 2010 due to
stiff competition.

Going forward, we expect that Nasdaq will find it difficult to
regain its lost market share unless it acquires another stock
exchange. However, any further drop in Nasdaq's market share is
unlikely because Nasdaq has one of the best trading platforms which
provide an edge over competition.

Scroll through our slideshow to modify the above mentioned
drivers and you can view addition
Nasdaq articles here
.